This is a very readable 12-page explanation of the concept of ‘control fraud’ and its effect on the economy. It was written by William Black in 2005 and its full title is: When Fragile becomes Friable: Endemic Control Fraud as a Cause of Economic
Stagnation and Collapse.
The original is here, I have also posted it to Scribd for readability and easier dissemination:
A quote from the document:
Neo-classical economics’ understanding of fraud is so weak that its policy prescriptions,
if adopted wholly, produce strongly criminogenic environments that cause waves of
control fraud. Neo-classical policies simultaneously make control fraud easier and more
lucrative, dramatically reduce the risk of detection and prosecution by maximizing
“systems capacity” problems, and encourage crime by making it easier for fraudsters to
“neutralize” the social and psychological constraints against deceit and fraud. Thus the
paradox: neo-classical economic triumphs produce tragedy.
William Black does not say so, but might the failure of neo-classical economics to recognise fraud as a problem be due to the fact that neo-classical economics is a fraud itself, having as its purpose the enriching of a few while everyone and everything else be damned?
Interesting reading at TomDispatch.com (via Financial Armageddon) which confirms what we – and many others have been thinking and writing about for some time now: There is a bit more to this financial meltdown than ‘bad luck’ and ‘could not have been foreseen’.
Those are lies propagated by those who would like to cover their tracks, avoid accountability and pocket even more money. This amidst economic calamity which will wipe out the economic foundation on which many million people depend for a living, without any show of remorse, guilt or regret.
In Newsweek, Paulson claims “I didn’t understand the retail market; I just wasn’t close to it.”
Hhm, that coming from the former head of Goldman Sachs, who made some $650mln dollar in the process and was a frequent-flyer with destination China, this has zero credibility. Even if true, it would only prove that no particular knowledge or insight is needed to make hundreds of millions on Wall St. The ‘best and brightest’ they are not then, their bonuses totally undeserved and their frequent ‘trust-me-I-know-what-I-am-doing’ sales pitches are demasked as, well, crass overstatements having no connection to reality. So the ‘we’ve got to pay high salaries’ is just bull/bear droppings.
That the danger of a repeat of this economic meltdown is not only possible but almost a certainty can be seen by the fact that those people have learned nothing, is best demonstrated with Deutsche Bank CEO, Josef Ackermann’s, recent remarks that he intends to pursue his 25% return-on-equity target profitability. Back to business-as-usual, and the ripp-off can continue.